Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday announced sweeping changes in norms relating to mutual funds, public issues, capital raising and commodity derivatives after its board met for the first time under new chairman Ajay Tyagi.

The regulator allowed new investment and redemption routes in mutual funds; tightened initial public offering (IPO) norms to ensure that funds raised are not misused; eased existing capital-raising norms to help banks deal with rising bad loans; and announced changes in securities contracts norms for better integration of the commodity derivatives market with the securities market.

Investors can instantly redeem liquid mutual funds up to Rs50,000 a day, or 90% of the folio value, whichever is lower. Currently, money from redeeming a mutual fund gets credited to a customer’s account only on the next working day or two days after the request if it is not done through the immediate payment service (IMPS), placing liquid funds at a disadvantage to bank fixed deposits. While some funds are already providing this instant redemption facility, Sebi has capped the redemption limit at Rs50,000.

Sebi also allowed investors to use e-wallets to buy mutual funds of up to Rs50,000 per financial year. This move could potentially increase inflows into India’s Rs18 trillion mutual funds market. However, redemptions of such investments will flow back to the bank account of the unit holder, it said.

The regulator said e-wallet issuers must not offer any incentive such as cash-back payments. It also stipulated that only e-wallet balance loaded through cash or debit card or net banking (and not credit cards) could be used for such investments.

“This is an enabling provision and will help the industry in on-boarding new investors," said A. Balasubramanian, managing director and chief executive officer of Birla Sun Life Asset Management Company.

Sebi also gave the green signal for options contracts in commodity derivatives, and integrated broking activities in equity markets and commodity derivatives markets under a single entity. These two issues were highlighted by finance minister Arun Jaitley in the last two Union budgets.

For options trading, Sebi is proposing to amend the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012. This will allow commodity exchanges to launch options products that can be settled by converting them to futures a day before the expiry of the contract.

“Options definitely would complement the existing futures contracts and further bolster price discovery process in Indian commodity market. Options would attract the domestic hedgers from small to large to hedge on domestic exchanges," said Mrugank Paranjape, managing director and chief executive officer, Multi Commodity Exchange of India Ltd.

The detailed guidelines for trading in options on commodity derivatives exchange will be issued by Sebi, the market regulator in a statement.

Sebi will also amend stock brokers’ regulation so that it can integrate stock brokers in equity and commodity derivative markets. This will enable the same entity to operate in both markets.

“This step will massively reduce costs for financial intermediaries and also give them more opportunities as now it will be easier to approach equity (and commodity) clients," said Chintan Modi, executive vice-president at securities house IIFL.

Sebi also made it compulsory for companies to appoint a monitoring agency if their capital market issue size (excluding offer-for-sale component) is more than Rs100 crore. Earlier, the floor was Rs500 crore.

“We have learnt that smaller issues are being misused," said Tyagi.

Monitoring agencies will have to submit their report every quarter now (from half-yearly earlier) and companies will have to publish this report on their websites besides sending to stock exchanges, Sebi said.

Separately, the Sebi board also allowed systemically important non-banking financial companies (NBFCs) to be classified as qualified institutional buyers (QIBs). Half the shares in IPOs are allotted to QIBs. Such NBFCs should have a net worth of at least Rs500 crore.

Banks and public financial institutions get a relaxation relating to preferential allotment to deal better with the bad loans issue. Typically, companies cannot make preferential allotment of shares to any entity which has sold their shares during the six months preceding the issue date. But many banks found themselves on the wrong side of these regulations when they had to sell shares of companies whose bad debt they had to convert to equity. This criterion has been relaxed.